Asstt.Commissioner of Income Tax, C-3, Ludhiana V. M/S Mrs.Bectors Food Specilties Ltd, Ludhiana

ITA 71/CHANDI/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6406 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 24-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBHASH AGGARWAL
• Assessee Lawyers: N D GUPTA
• Keywords: Business income; Depreciation
• Section: 14A; 80IB

Judgement Text

S , , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B , CHANDIGARH , !'# $' % & , '( BEFORE: SHRI SANJAY GARG, JM & SMT.ANNAPURNA GUPTA, AM ./ ITA NO.71/CHD/2018 / ASSESSMENT YEAR : 2014-15 THE A.C.I.T., CIRCLE-3, LUDHIANA M/S MRS.BECTORS FOOD SPECIALTIES LTD., B-XXXIII-324, G.T. ROAD (WEST), LUDHIANA. ./ PAN NO.AABCM9495K / APPELLANT / RESPONDENT /ASSESSEE BY : SHRI N.D.GUPTA, SR. DR ! / REVENUE BY : SHRI SUBHASH AGGARWAL, ADV. '# $ /DATE OF HEARING : 20.12.2018 %&'(# /DATE OF PRONOUNCEMENT: 18.01.2019 ') /ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, LUDHIANA (IN SHORT CIT(A) DATED 3.11 .2017 PASSED U/S 250(6) OF THE INCOME TAX AT, 1961 (HEREI NAFTER REFERRED TO AS ACT). 2. AT THE OUTSET ITSELF THE LD. COUNSEL FOR ASSESSE E POINTED OUT THAT BOTH THE ISSUES RAISED BY THE REVENUE IN T HE PRESENT APPEAL STAND COVERED IN FAVOUR OF THE ASSES SEE BY THE RECENT DECISION OF THE COORDINATE BENCH OF THE I.T.A.T. IN THE CASE OF THE ASSESSEE ITSELF RELATING TO ASSESSM ENT YEARS 2007-08, 2008-09 AND 2010-11 TO 2013-14 VIDE THEIR ITA NO.71/CHD/2018 A.Y.2014-15 2 CONSOLIDATED ORDER IN ITA NO.555/CHD/2017 & OTHERS DATED 21-05-2018. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. WHETHER UPON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.45,60,985/- U/S. 80IC OF THE INCOME TAX ACT, 1961 ON JOB WORK CHARGES RECEIVED FROM THE ITC LTD.? 2. WHETHER UPON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.53,56,667/- U/S. 80IC OF THE INCOME TAX ACT, 1961 IN LIEU OF INDIRECT BENEFIT RECEIVED BY ASSESSEE FROM THE PARENT COMPANY M/S. CREMICA AGRO FOODS LTD.? 3. GROUND NO.1 RELATES TO THE CLAIM OF DEDUCTION U/ S 80IC OF THE ACT IN RESPECT OF THE INCOME FROM TAHLIWAL U NIT OF THE ASSESSEE LOCATED IN HIMACHAL PRADESH ON JOB WORK CH ARGES RECEIVED BY THE ASSESSEE FROM ITC LTD. THE A.O. HAD DENIED THE SAID CLAIM STATING THAT THE DEDUCTION U/S 80IC IS ONLY AVAILABLE ON INCOME DERIVED BY AN UNDERTAKING FROM THE BUSINESS OF MANUFACTURING OR PRODUCING ANY ARTICLE OR THING AND THE NATURE OF INCOME OF JOB WORK CHARGES CANNOT BE TREATED TO HAVE BEEN DERIVED BY THE UNDERTAKING BY MANUFACTURING OR PRODUCING ANY ARTICLE OR THING. TH E LD. CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE ON FINDING THAT IN ASSESSMENT YEARS 2006-07 AND 2007-08 THIS I SSUE HAD BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE C IT(A), FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONA L HIGH COURT PUNJAB & HARYANA IN THE CASE OF IMPEL FORGE & ALLIED INDUSTRIES LTD. (2008), ITA NO.543 OF 2008 DATED 5. 12.2008 AND THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF NORTHERN AROMATICS LTD. (2005) 196 CTR 479 (DEL ). ITA NO.71/CHD/2018 A.Y.2014-15 3 4. BEFORE US LD. COUNSEL FOR ASSESSEE POINTED OUT THAT THIS ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF TH E ASSESSEE BY THE ITAT IN EARLIER YEARS I.E, ASSESSMENT YEARS 2007-08 TO 2008-09 AND 2010-11 TO 2013-14, VIDE THEIR ORDER I TA NO.555/CHD/2017 & OTHERS DATED 21.5.2018.OUR ATTENT ION WAS DRAWN TO PARA 7 OF THE ORDER, POINTING OUT THER EFROM THAT THE I.T.A.T. HAD ALLOWED THE CLAIM ON NOTING T HAT IN THE CASE OF M/S CREMICA AGRO FOODS PVT. LTD., THE I.T.A .T. HAD DECIDED IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE I N ASSESSMENT YEAR 2006-07. THE RELEVANT FINDINGS OF THE I.T.A.T. AT PARAS 7 TO 7.4 OF THE ORDER ARE AS UNDE R: 7. ISSUE OF DISALLOWANCE OF SECTION 80IC ON JOB WOR K:- A.Y. 2007-08: GROUND NO. 2 OF THE REVENUES APPEAL A.Y. 2010-11: GROUND NO. 2 OF THE REVENUES APPEAL A.Y. 2011-12: GROUND NO. 1 OF THE REVENUES APPEAL A.Y. 2012-13: GROUND NO. 1 OF THE REVENUES APPEAL A.Y. 2013-14: GROUND NO. 1 OF THE REVENUES APPEAL 7.1 THE RELEVANT PORTION OF THE ASSESSMENT ORDER PERT AINING TO DISALLOWANCE ON JOB WORK IS AS UNDER: DURING THE ASSESSMENT PROCEEDINGS VIDE ORDER SHEET ENTRY DATED 27.11.09 THE ASSESSEE WAS ASKED WHY PROPORTIONATE DED UCTION U/S 80IC ON TAHLIWAL UNIT MAY NOT BE DISALLOWED FOR THE JOB WORK DONE TO M/S ITC LIMITED AS PER THE OBSERVATIONS IN TH E ASSESSMENT ORDER FOR A.Y. 2006-07 IN THE CASE OF M/S CREMICA AGR O FOOD LTD., LUDHIANA. THE ASSESSEE VIDE LETTER 4.12.09 STATED AS UNDER:- 'REGARDING DISALLOWANCE OF DEDUCTION U/S 80IC IN TAHL IWAL UNIT ON JOB WORK DONE FOR ITC LIMITED IN THE ASSESSMENT YEAR 2006-07 IT IS SUBMITTED THAT SINCE THE FACTS OF THE CASE ARE SIMILA R, YOU ARE REQUESTED TO PLEASE REFER TO OUR REPLY DATED 11 TH DECEMBER, 2008 AND 17 TH DECEMBER, 2008 FILED DURING THE ASSESSMENT PROCEEDI NGS OF CREMICA AGRO FOODS LTD. (AY 2006-07).' FURTHER THE ASSESSEE VIDE LETTER DATED 18.12.2009 SUBM ITTED AS UNDER:- REGARDING DISALLOWANCE OF DEDUCTION U/S 80IC ON TAHLI WAL UNIT ON INCOME EARNED FROM JOB CHARGES OF ITC LIMITED IN THE ASSESSMENT YEAR 2006-07, WE SUBMIT THAT WE HAVE CORRECTLY CLAIMED THE DEDUCTION U/S 80IC OF THE INCOME TAX ACT, 1961 ON IN COME EARNED FROM JOB CHARGES. RELIANCE IS PLACED ON THE FOLLOWING CASE LAWS: ITA NO.71/CHD/2018 A.Y.2014-15 4 ACIT VS. BIOTECH MEDICALS P LTD. (2009) 170 TAXMAN 3 (2009) 310 ITR 47 (AT) (HYD) (2009) 121 TTJ 858 SEC SOIB - JOB WORK/CONVERSION CHARGES RECEIVED BY AN INDUSTRIAL UNDERTAKING - ENTITLED TO 80IB. PROFIT ON SALE OF SCRAP AND INTEREST ON DELAYED PAYMENT HAVE DIRECT NEXUS WITH MANUFACTURING ACTIVITY. CIT VS. NORTHERN AROMETICS LTD. (2 005) 196 CTR 479 (DEL) WARREN LABORATORIES VS. DCIT (2005) 3 SOT 638 (MUM - TRIB) SEC-80IA - ASSESSEE ENGAGED IN JOB WORK - ELIGIBLE FOR DEDUCTION U/S 801 A. ITO, LUDHIANA V/S IMPEL FORGE P LTD. (2008) 36 ITREP 454 (CHD) AFFIRMED IN ( 2009) 183 TAXMAN 38 (P&H) S.80-IB - DEDUCTION ALLOWABLE TO A MANUFACTURING UNIT WHO DOES THE JOB WORK INVOLVING THE SAME PROCESSES FOR OTHERS. SECTION-80 IB- ASSESSEE IS AT LIBERTY TO DO MANUFACTURING FOR ITSELF OR FOR OTHERS, WHICH MAKES NO DIFFERENCE FOR PURPOSE OF DEDUCTION U/S 80-IB. ALLOWABLE ON JOB WORK. IN VIEW OF ABOVE SUBMISSIONS WE HAVE CORRECTLY CLAIM ED DEDUCTION U/S 801C ON THE PROFITS EARNED ON JOB WORK.' THE ASSESSEE IS DOING JOB WORK FOR M/S ITC LTD. AT TA HLIWAL. THE ASSESSEE HAS PROVIDED THE COPY OF AGREEMENT BETWEEN M/S ITC LTD., KOLKATTA AND M/S CREMICA AGRO FOODS LTD. DATED 1 4 TH JUNE, 2004. ON THE PERUSAL OF THE AGREEMENT IT IS CLEAR THAT THE ASSESSEE IS PROVIDING LABOUR, ELECTRICITY ETC. WHILE THE QUALITY SUPERVISION DURING THE MANUFACTURING AND PACKING PROCESS IS DON E BY THE EMPLOYEES OF M/S ITC LTD. M/S ITC LIMITED HAS PROVIDED THE PLANT AND MACHINERY REQUIRED FOR MANUFACTURING OF BISCUITS, PACKING ETC. M/S ITC LIMITED IS ALSO PROVIDING RAW MATERIAL AND ITSELF INCURRING THE EXPENDITURE FOR THE TRANSPORTATION OF RAW MATERIA L AND FINISHED PRODUCTS. NO SEPARATE RECORD AS PER ASSESSEE IS BEIN G MAINTAINED FOR LABOUR OR ELECTRICITY EXPENSES OR ANY JOB WORK EXPENSES INCURRED BY THE ASSESSEE. THE COST OF ALL ITEMS ON THE JOB WORK TO BE PERFORMED BY THE ASSESSEE HAS ALREADY BEEN CARRIED O UT IN THE AGREEMENT AS PER ANNEXURE B. THE KNOW-HOW INCLUDING R ECIPE, TECHNOLOGY, PROCESS INFORMATION ETC. HAS BEEN PROVIDED . THE MACHINES ARE OWNED BY M/S. ITC LTD. AND HAS BEEN GIVE N ON HIRE AS PER A SEPARATE MACHINE HIRING AGREEMENT TO M/S. M RS. BECTOR FOOD SPECIALITIES LTD. CLAUSE 2.1 OF ARTICLE 2 OF THE A GREEMENT PROVIDES THAT CERTAIN MACHINERY AND EQUIPMENTS FOR I TC LTD. IS LYING WILL BE HIRED OUT BY ITC LTD. UNDER A SEPARATE M ACHINE AGREEMENT. THE ASSESSEE HAS PROVIDED CERTAIN UTILITIE S AND ASSETS AS PER ANNEXURE F OF THE AGREEMENT. HOWEVER, THESE AR E BEING USED COMMONLY AND M/S ITC LTD. HAS CONTRIBUTED 50% F OR THE SAME/THEREFORE, ALL THE MACHINERY IS PROVIDED M/S ITC LTD. TO THE ASSESSEE. AS PER THE AGREEMENT M/S ITC LTD. IS YING T O THE ASSESSEE FOR ELECTRICITY AND LIGHT DIESEL & OIL (LDO) CH ARGES PER KG OF THE PRODUCTION. THE ASSESSEE HAS RECEIVED A SUM OF RS.7,60,06,474/- AS J OB CHARGES FROM M/S ITC LIMITED DURING THE YEAR. THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEED INGS OF ASSESSMENT YEAR 2006-07 HAS OBSERVED ON THIS ISSUE I N THE CASE OF M/S. CREMICA AGRO FOODS LTD. , WHICH IS RELEVANT THIS Y EAR ALSO AS FOLLOWS:- ITA NO.71/CHD/2018 A.Y.2014-15 5 '9. THE ASSESSEE IS DOING JOB WORK FOR M/S ITC AT TA HLIWAL. THE ASSESSEE HAS PROVIDED THE COPY OF AGREEMENT BET WEEN M/S ITC LTD., KOLKATTA AND M/S CREMICA AGRO FOODS LTD. DAT ED 14 TH JUNE, 2004. THE KNOW-HOW HAS BEEN PROVIDED BY M/S ITC TO THE ASSESSEE AND IT FURTHER PROVIDES THAT THE MACHINERY PROVIDED BY IT WILL BE USED ONLY FOR THE MANUFACTURING AND PACKING TH E PRODUCTS OF M/S ITC LTD. THE DETAILS OF THE MACHINERY HAVE ALSO BEEN PROVIDED IN THE AGREEMENT AS SCHEDULE 2 AND ANNEXURE F. ON THE PERUSAL OF THE AGREEMENT IT IS CLEARED THAT THE ASSESSEE IS PROVIDING LABOUR, ELECTRICITY ETC. WHILE THE QUALITY SUPERVISION DU RING THE MANUFACTURING AND PACKING PROCESS IS DONE BY THE EM PLOYEES OF M/S ITC LTD. M/S ITC IS PROVIDING RAW MATERIAL AND ITSE LF INCURRING THE EXPENDITURE FOR THE TRANSPORTATION OF RAW MATERIA L AND FINISHED PRODUCTS. NO SEPARATE RECORD AS PER ASSESSEE IS BEIN G MAINTAINED FOR LABOUR OR ELECTRICITY EXPENSES. THE ASSESSEE HAS RE CEIVED RS.6,21,91,396/- AS JOB CHARGES. 10. THE INCOME U/S 80IC IS EXEMPTED ONLY WHICH IS D ERIVED BY AN UNDERTAKING FROM THE BUSINESS OF MANUFACTURING O R PRODUCING ANY ARTICLE OR THING NOT PROHIBITED BY THIRTEENTH SCH EDULE OF THE INCOME TAX ACT, 1961. THE NATURE OF INCOME OF JOB CHA RGES CANNOT BE TREATED TO HAVE BEEN DERIVED BY THE UNDERTAKING BY MANUFACTURING OR PRODUCING ANY ARTICLE OR THING BY P ROVIDING ONLY THE LABOUR AND ELECTRICITY. THEREFORE THE PROPORTIONAT E INCOME DERIVED FROM THE JOB WORK CANNOT BE CLAIMED AS EXEMP TED U/S 80IC. SINCE THE ASSESSEE HAS NOT MAINTAIN SEPARATE A CCOUNTS FOR VARIOUS EXPENSES INCURRED ON THE JOB WORK DONE BY IT , THE INCOME EARNED FROM THIS ACTIVITY CANNOT BE DETERMINED ACCUR ATELY. HOWEVER, TO COMPUTE THE EXEMPTED INCOME AND NON EXEM PTED INCOME U/S 80IC, I ADOPT THE METHOD TO CALCULATE IT ON PR OPORTIONATE BASIS I.E. JOB CHARGES RECEIVED DIVIDED BY TOTAL SALE S MULTIPLIED BY THE PROFITS. THE DEPRECIATION ON THE MACHINERY PROVID ED BY M/S ITC HAS ALSO NOT BEEN CLAIMED BY THE ASSESSEE, ALTHOUGH, IT HAS PAID NOMINAL LEASE CHARGES @ RS. 12,000/- PER ANNUM. THE AMOUN T TO BE DISALLOWED IS AS FOLLOWS: - JOB CHARGES RS. 6,21,91,396/- TOTAL SALES RS. 46,23,23,692/- GROSS PROFITS (80IC) RS. 1,21,63,320/- AMOUNT NOT EXEMPTED = 62191396/462323692 X 12163320 =16,36,199/-. 11. THEREFORE, AN AMOUNT OF RS. 16,36,199/- IS TREATED A S NOT EXEMPTED U/S 80IC DERIVED FROM TAHLIWAL UNIT ( UNA) AN D WILL BE ADDED THAT TO THE INCOME OF THE ASSESSEE. THE DEDUCTI ONS FOR DEPRECIATION WILL NOT BE ALLOWED SINCE THE MACHINERY O F THE ASSESSEE HAS NOT BEEN USED. 12. AS PER FORM NO 10CCB THE UNITS HAS STARTED ITS AC TIVITY ON 05.10.2004 AND THE INITIAL ASSESSMENT YEAR IS 2005-06. TH E TAHLIWAL UNITS HAS JUST COMMENCED ITS OPERATION AND H AS EARNED PROFIT OF RS. 1,21,63,320/- THE NET PROFIT RATIO IS FOUR TIMES HIRE THEM THE NET PROFIT OF PHILLAUR UNITS ALL THOSE THE GRO SS PROFIT RATIO ARE ALMOST THE SAME. IT SHOWS THAT THE ASSESSEE HAS PLANED THE ITA NO.71/CHD/2018 A.Y.2014-15 6 UNITS IN SUCH A WAY THAT IS EARNED MORE PROFIT THAN PHILLAUR UNITS SINCE THE INCOME IS EXEMPTED FROM INCOME TAX.' THE INCOME U/S 80IC IS EXEMPTED ONLY WHICH IS DERIVE D BY AN UNDERTAKING FROM THE BUSINESS OF MANUFACTURING OR P RODUCING ANY ARTICLE OR THING NOT PROHIBITED BY THIRTEENTH SCHEDULE OF THE INCOME TAX ACT, 1961. IT HAS BEEN HELD BY THE HON'BLE SUPREME COURT IN CIT VS. STERLING FOODS (237 ITR 579) THAT THE EXPRESS ION 'PROFITS AND GAINS DERIVED FROM' HAVE BEEN USED DELIBERATELY BY THE LEGISLATURE AS THE INTENTION WAS TO COVER ONLY THOSE RECEIPTS WHICH ACCRUED DUE TO ACTUAL CONDUCT OF THE BUSINESS. HAD THE INTENTION OF LEGISLATURE BEEN TO COVER RECEIPTS FROM OTHER SOURCE S AS WELL, THEN INSTEAD OF USING THE WORDS,' PROFITS AND GAINS DERIV ED FROM', THE EXPRESSION ATTRIBUTABLE TO WHICH HAS WIDER IMPORT, WOU LD HAVE BEEN USED. FURTHER, TO AVAIL OF THE BENEFIT OF DEDUCTION PROVISIONS, THE ASSESSEE HAS TO ESTABLISH THAT THE PROFITS AND GAINS ARE DER IVED FROM ITS INDUSTRIAL UNDERTAKING AND IT IS NOT SUFFICIENT THAT A COMMERCIAL CONNECTION WAS ESTABLISHED BETWEEN PROFITS EARNED A ND THE INDUSTRIAL UNDERTAKING. THE INDUSTRIAL UNDERTAKING ITSELF HAS TO BE THE SOURCE OF THE PROFIT. WHEN THE INDUSTRIAL UNDERTAKING IS ENGAGED IN MANUFACTURING THEN THE PROFIT EARNED FROM THE MA NUFACTURING ALONE QUALIFY FOR THE DEDUCTION 80IB. THE NATURE OF INCOME OF JOB CHARGES CANNOT BE TREAT ED TO HAVE EN DERIVED BY THE UNDERTAKING BY MANUFACTURING OR PROD UCING ANY ARTICLE OR THING BY PROVIDING ONLY THE LABOUR AND ELE CTRICITY. THEREFORE, THE PROPORTIONATE INCOME DERIVED FROM THE JOB WORK CANNOT BE CLAIMED AS EXEMPTED U/S 80IC. SINCE THE ASS ESSEE HAS NOT MAINTAINED SEPARATE ACCOUNTS FOR VARIOUS EXPENS ES INCURRED ON THE JOB WORK DONE BY IT, THE INCOME EARNED FROM THI S ACTIVITY CANNOT BE DETERMINED ACCURATELY. HOWEVER, TO COMPUTE THE EXE MPTED INCOME AND NON EXEMPTED INCOME U/S 80IC, I ADOPT THE METHOD TO CALCULATE IT ON PROPORTIONATE BASIS I.E. JOB CHARGES RE CEIVED DIVIDED BY TOTAL SALES MULTIPLIED BY THE PROFITS. THE DEPRECI ATION ON THE MACHINERY PROVIDED BY M/S ITC HAS ALSO NOT BEEN CLAIM ED BY THE ASSESSEE. THE AMOUNT TO BE DISALLOWED COMES TO RS. 29,43 ,718/-, THE DETAILS OF SAME ARE AS FOLLOWS:- SALES RS.33,84,77,491/- JOB CHARGES RS. 7,60,06,474/- TOTAL (SALES + JOB CHARGES) RS.41,44,83,965/- NET PROFITS (80IC) RS. 1,60,52,899/- AMOUNT NOT EXEMPTED = 7,60,06,474 /41,44,83,965 X 1,60,52,89 9 =29,43,718/- THEREFORE, AN AMOUNT OF RS.29,43,718/- I S TREATED AS NOT EXEMPTED U/S 80IC DERIVED FROM TAHILWAL (UNA) AND WILL BE ADDED THAT TO THE INCOME OF THE ASSESSEE. 7.2 THE LD. CIT(A) DELETED THE ADDITION FOLLOWING THE EARLI ER YEARS ORDER. ITA NO.71/CHD/2018 A.Y.2014-15 7 7.3 THE MATTER HAS FURTHER TRAVELLED TO THE TRIBUNAL IN THE A.Y. 2006-07 WHICH STANDS ADJUDICATED IN THE FAVOUR OF TH E ASSESSEE. FOR THE SAKE OF BREVITY THE RELEVANT PORTION OF THE ORDER OF THE ITAT IN THE CASE OF THE ASSESSEE IN ITA NO. 39 & 40/CHD/ 2017 DT. 08/12/2017 IN THE CASE OF M/S. CREMICA AGRO FOODS PV T. LTD. FOR THE A.Y. 2006-07. 34. GROUND OF APPEAL N.5 RAISED BY THE REVENUE READS AS UNDER: 5. 'WHETHER UPON FACTS AND CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS.1 6,36,199/- MADE BY THE A.O. ON DEDUCTION U/S 80IC ON JOB WORK CHA RGES BY SIMPLY RELYING ON THE SUBMISSIONS OF THE ASSESSEE AN D NOT BY GIVING ANY INDEPENDENT FINDINGS?' 35. THE ABOVE GROUND OF APPEAL IS REGARDING DISALLOWANC E OF DEDUCT ION OF PROPORTIONATE PROFITS OF RS.16,36,199/- O N THE JOB CHARGES EARNED BY THE ASSESSEE FROM ITC LIMITED AT TH E TAHLIWAL UNIT . THE ASSESSEE HAD RECEIVED JOB CHARGES OF RS.6,2 1,91,396/- FROM ITC LIMITED FOR THE MANUFACTURE OF BISCUITS. THE ASSESSING OFFICER HELD THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCT ION U/S 80IC OF THE ACT ON THE PROFITS DERIVED FROM THE SAME WHICH WAS COMPUTED ON PROPORTIONATE BA SIS AT RS.16,36,199/- . 36. BEFORE THE LD.CIT(APPEALS) , THE ASSESSEE RELIED UP ON ON A NUMBER OF CASE LAWS IN SUPPORT OF ITS CONTENT ION T HAT EVEN VIS--VIS PROFITS DERIVED FROM JOB WORK CHARGES THE ASSESSEE IS ENTITLED U/S 80IC OF THE ACT . THE LD.CIT(APPEALS) RELYING UPON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF C IT VS. IMPEL FORGE & ALLIED INDUSTRIES LTD. , 326 ITR 27 AND THE DE CISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. NORTHE RN AROMATICS LTD. (2005) 196 CTR 479 HELD THAT THE ASSESSEE WAS ENT ITLED TO CLAIM DEDUCT ION ON PROFITS EARNED ON ACCOUNT OF JOB WORK UNDERTAKEN BY I T HOLDING AS UNDER: FURTHER, THE BASIC PROCESS IS CARRIED OUT BY THE APP ELLANT IS THE SAME WHETHER THE PRODUCTION IS DONE FOR ITSELF OR J OB WORK. THE HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS IMPEL FORGE AND ALLIED INDUSTRIES LTD 326 ITR 27 HAS HELD T HAT THE ASSESSEE IS AT LIBERTY TO MANUFACTURE FOR ITSELF OR OTHERS WHICH MAKES NO DIFFERENCE FOR THE PURPOSE OF DEDUCTION UN DER SECTION 80IB OF THE ACT. SIMILAR VIEW WAS TAKEN BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS NORTHERN AROMATICS LTD (2005) 196 CTR (DELHI) 479. IN VIEW OF THE SAME, THE REDUCTION IN THE CLAIM MADE BY THE APPELLANT UNDER SECTION 80IC ON THIS ACCOUNT DESE RVES TO BE DELETED. THESE GROUNDS OF APPEAL ARE ALLOWED. 37. BEFORE US, THE LD. DR DID NOT POINT OUT ANY INFIRM ITY IN THE ORDER OF THE LD.CIT(APPEALS) , NOR DID HE BRING TO OUR NOTICE ANY CONTRARY DECISION OF THE JURISDICTIONAL HIGH COURT A S OPPOSED TO THAT RELIED UPON BY THE LD.CIT(APPEALS) WHILE ADJUDICATING T HE ISSUE. IN ITA NO.71/CHD/2018 A.Y.2014-15 8 VIEW OF THE SAME, WE UPHOLD THE ORDER OF THE LD.CIT(APP EALS) IN DELETING THE REDUCTION IN THE CLAIM MADE BY THE ASSESS EE ON ACCOUNT OF JOB WORK CHARGES AMOUNT ING TO RS.16,36,199 /- THE GROUND OF APPEAL NO.5 RAISED BY THE REVENUE IS, THEREF ORE, DISMISSED. 38. GROUND NO.6 RAISED BY THE REVENUE READS AS UNDER: 6. 'WHETHER UPON FACTS AND CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.15 L AKH MADE ON ACCOUNT OF DISALLOWANCE OUT OF CLAIM OF INTEREST U/S 36 (L)(III) OF THE INCOME-TAX ACT, 1961 SIMPLY RELYING ON THE SUBMISSION S OF THE ASSESSEE IGNORING THE FACTS THAT THE ASSESSEE COULD NOT PROVIDE THE COPIES OF ACCOUNTS OF VARIOUS PERSONS COVERED U/S 4 0A(2)(B) OF THE INCOME-TAX ACT, 1961 DESPITE BEING GIVEN AMPLE OPPOR TUNITY TO DO SO? 7.4 AS THE MATTER STANDS ADJUDICATED, FOLLOWING THE RA TIO LAID DOWN WHICH IS SQUARELY APPLICABLE TO THE APPEALS BEFOR E US, THE GROUNDS RAISED BY THE REVENUE ON THIS ISSUE ARE HE REBY DISMISSED. 5. THE LD. DR FAIRLY CONCEDED THAT THE ISSUE HAD BE EN DECIDED IN FAVOUR OF THE ASSESSEE IN EARLIER YEARS, THOUGH HE RELIED UPON THE ORDER OF THE A.O. 6. IN VIEW OF THE ABOVE, SINCE ADMITTEDLY THE ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE IN EARLIER YEARS RIGHT FROM ASSESSMENT YEAR 2007-08 TO 2013-14 AND NO DISTINGUI SHING FACTS HAVING BEEN BROUGHT TO OUR NOTICE BY THE LD. DR, WE SEE NO REASON TO INTERFERE IN THE ORDER OF THE CIT( A) IN ALLOWING THE ASSESSEES CLAIM OF DEDUCTION U/S 80IC OF THE ACT ON JOB WORK INCOME EARNED BY TAHLIWAL UNIT OF T HE ASSESSEE IN HIMACHAL PRADESH FROM ITC LTD. GROUND OF APPEAL NO.1 RAISED BY THE REVENUE IS, THEREFORE, DI SMISSED. 7. GROUND NO.2 RAISED BY THE REVENUE RELATES TO RED UCTION OF PROFITS EARNED BY TAHLIWAL UNIT OF THE ASSESSEE ON WHICH IT HAD CLAIMED DEDUCTION U/S 80IC OF THE ACT, BY 10 %, FOR THE REASON THAT THE ENTIRE PROFITS COULD NOT HAVE B EEN EARNED ITA NO.71/CHD/2018 A.Y.2014-15 9 BY THIS NEW INDEPENDENT GROUP WITHOUT HAVING EXPERT ISE, EXPERIENCE, MARKET SHARE, GOODWILL, TRADE NAME, KNO W-HOW, ETC. AS PER THE A.O. THE ASSESSEE HAD UTILIZED THE EXPERTISE ETC. OF ITS PARENT UNIT AT PHILLAUR ON ACCOUNT OF WHICH INDIRECT BENEFIT HAD BEEN DERIVED BY THE ASSESSEE T O THE EXTENT OF 10% OF THE PROFITS FROM THE PARENT UNIT, WHICH NEEDED TO BE REDUCED FROM THE SAME AS PER THE PROVI SIONS OF SECTION 80IA(8) &(10) OF THE ACT R.W.S. 80IC OF THE ACT. THE LD.CIT(A) ALLOWED THE ASSESSEES APPEAL FOLLOWING H IS ORDER FOR ASSESSMENT YEARS 2006-07 AND 2007-08. 8. DURING THE COURSE OF HEARING BEFORE US IT WAS PO INTED OUT THAT THIS ISSUE ALSO HAD BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT IN EARLIER YEARS I.E, ASSESSME NT YEARS 2007-08 TO 2008-09 AND 2010-11 TO 2013-14 IN ITA NO.555/CHD/2017 & OTHERS IN THEIR ORDER DATED 21.5.2018.DRAWING OUR ATTENTION TO THE RELEVANT PAR A 6 OF THE ORDER, IT WAS POINTED OUT THAT THE I.T.A.T. HAD ALLOWED THE SAME ON NOTING THAT IN THE CASE OF M/S CREMICA AGRO FOODS PVT. LTD. THE I.T.A.T. HAD DECIDED IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN ASSESSMENT YEAR 2006-07. THE RELEVANT FINDINGS OF THE I.T.A.T. AT PARA 6 OF THE ORDER ARE AS UNDER: 6. ISSUE OF DISALLOWANCE OF SECTION 80IC ON INDIRE CT BENEFITS A.Y. 2007-08: GROUND NO. 3 OF THE REVENUES APPEAL (CREMICA) A.Y. 2010-11: GROUND NO. 3 OF THE REVENUES APPEAL (CREMICA) A.Y. 2011-12: GROUND NO. 2 OF THE REVENUES APPEAL (CREMICA) A.Y. 2012-13: GROUND NO. 2 OF THE REVENUES APPEAL (CREMICA) A.Y. 2013-14: GROUND NO. 2 OF THE REVENUES APPEAL (CREMICA) 6.1 THE RELEVANT PORTION OF THE ASSESSMENT ORDER PERT AINING TO DISALLOWANCE IS AS UNDER: ITA NO.71/CHD/2018 A.Y.2014-15 10 THE ASSESSEE IS RUNNING A UNIT AT TAHLIWAL CLAIMING EX EMPTION U/S 80IC OF THE INCOME TAX ACT, 1961 ESTABLISHED BY M/S CREMICA AGRO FOODS LIMITED IN A INDUSTRIAL GROWTH CENT RE IN THE STATE OF HIMACHAL PRADESH AS PER SECTION 80IC(2)(II ). M/S. CREMICA AGRO FOODS LTD. HAD TAKEN THE LAND ON LEASE FROM HIMACHAL PRADESH GOVERNMENT FOR ESTABLISHING ITS UNIT IN HIMACHAL PRADESH. THE FUNDS AND TECHNICAL KNOW HOW HAS BEEN PROVIDED BY THE MANAGEMENT SINCE IT WAS ALREADY RUNNING THE SIMILAR BUSINESS AT PHILLAUR. THE BRAND NA MES, PRODUCTS, QUANTITIES, PACKING, SIZES/ QUANTITIES OF THE SALEABLE UNITS OF THE PRODUCTS ARE THE SAME, AS PER THE DISCU SSIONS WITH THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS . THE TAHLIWAL UNIT HAS NOT PAID ANY EXPENSES FOR KNOW HOW , GOODWILL, TRADE NAME, ESTABLISHING EXPENSES IN THE MAR KET FOR ITS PRODUCTS AS IT GOT A READYMADE MARKET GENERATED B Y PHILLAUR UNITS IN THE LAST 12 TO 15 YEARS, NO PATENT R IGHTS EXPENSES GIVEN TO PHILLAUR UNIT ETC. ALL THE PROFITS OF TAHLIWAL UNIT COULD NOT HAVE BEEN EARNED BY A NEWLY ESTABLISH ED INDEPENDENT GROUP WITHOUT HAVING EXPERIENCE, EXPERTIS E, MARKET SHARE, GOODWILL, TRADE NAME, KNOW HOW ETC. THEREFO RE, AS PER PROVISIONS OF SECTION 80IA (8)&(10), 10% OF THE PROFITS EARNED BY TAHLIWAL UNIT ARE CONSIDERED TO BE AN IND IRECT BENEFITS DERIVED FROM THE PARENT UNIT I.E. PHILLAUR. IT M AY NOT BE OUT OF PLACE TO MENTION THAT THE GROUP HAS STRUGG LED FOR TWELVE YEARS TO COME AT THIS LEVEL IN THE MARKET THROU GH PHILLAUR UNIT AND HAD EARNED VERY SMALL AMOUNT OF PROF ITS AS COMPARED TO TAHLIWAL UNIT AT PRESENT. THE ASSESSEE HAS SUBMITTED HIS REPLY ON THE ISSUE AS FOLLOWS :- 'REGARDING ESTIMATED AMOUNT OF DISALLOWANCE @ 10% OF DEDUCTION U/S 80IC IN RESPECT OF TAHLIWAL UNIT ON AC COUNT SOME ALLEGED INDIRECT BENEFITS DERIVED FROM PHILLAUR UNIT BY TAHLIWAL UNIT BY APPLYING PROVISIONS OF SUB SECTION 8 & 10 TO SECTION 801 A. IN THIS REGARD ' IT IS SUBMITTED THAT N O SUCH BENEFITS HAVE BEEN DERIVED BY TALHLIWAL UNIT. MOREOVER THE PROVISIONS OF SUB SECTION 8 & 10 TO SECTION 801A AR E NOT APPLICABLE IN THESE CIRCUMSTANCES AS THESE PROVISION S REFER TO TRANSFER OF GOODS AND SERVICE. WHILE IN THE 'INSTANT CASE THERE IS NO SUCH TRANSFER OF ANY GOODS OR SERVICE AND NO BUSINESS HAS BEEN TRANSACTED BETWEEN THE ELIGIBLE UNIT AND OT HER UNIT OF THE ASSESSEE COMPANY WHICH RESULTED IN EXCESS PRO FIT TO THE ELIGIBLE UNIT. UNLESS UNTIL ANY SPECIFIC BENEFIT IS POIN TED OUT AND EXPRESSED IN MONETARY TERMS, NO ADDITION CAN BE MADE ON THE BASIS OF CONJECTURES AND SURMISES.' I HAVE DULY CONSIDERED THE REPLY OF THE ASSESSEE. IT IS OBSERVED THAT THE EXEMPTED UNIT IS USING ALL THE SERVIC ES, REPUTATION, GOODWILL, EXPERIENCE, DEPOTS FACILITIES, SHA RING OF STAFF FOR SALES AND DISTRIBUTION, NETWORK OF ESTABLIS HED NON- EXEMPTED UNITS ETC. THEREFORE, THE PROVISIONS OF SUB-SE CTION 8 & 10 OF SECTION 80IA R.W.S. 14A OF INCOME TAX ACT, 19 61 ARE APPLICABLE IN THE CASE OF THE ASSESSEE. THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS OF ASSESSMENT YEA R 2006- ITA NO.71/CHD/2018 A.Y.2014-15 11 07 HAS OBSERVED ON THIS ISSUE IN THE CASE OF M/S. CR EMICA AGRO FOODS LTD. , WHICH IS RELEVANT THIS YEAR ALSO AS FOLLOWS: - '8. THE ASSESSEE IS RUNNING A UNIT AT TAHLIWAL CLAIMI NG EXEMPTION U/S 80IC OF THE INCOME TAX ACT, 1961 BEING ESTABLISHED IN A INDUSTRIAL GROWTH CENTRE IN THE STAT E OF HIMACHAL PRADESH AS PER SECTION 80IC(2)(II). THE ASSESSE E HAS TAKEN THE LAND ON LEASE FROM HIMACHAL PRADESH GOVERNME NT FOR ESTABLISHING ITS UNIT IN HIMACHAL PRADESH. THE FUN DS AND TECHNICAL KNOW HOW HAS BEEN PROVIDED BY THE MANAGEME NT SINCE IT WAS ALREADY RUNNING THE SIMILAR BUSINESS AT PHILLAUR. THE BRAND NAMES, PRODUCTS, QUANTITIES, PACKING, SIZES/QUANTITIES OF THE SALEABLE UNITS OF THE PRODUCTS ARE THE SAME, AS PER THE DISCUSSIONS WITH THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. THE TAHLIWAL UNIT HAS NOT PAID ANY EXPENSES FOR KNOW HOW, GOODWILL, TRADE NAME, ESTABLI SHING EXPENSES IN THE MARKET FOR ITS PRODUCTS AS IT GOT A READYMADE MARKET GENERATED BY PHILLAUR UNITS IN THE LAST 12 TO 15 YEARS, NO PATENT RIGHTS EXPENSES GIVEN TO PHILLAUR UNIT ETC. ALL THE PROFITS OF TAHLIWAL UNIT COULD NOT HAVE BEEN EARNED B Y A NEWLY ESTABLISHED INDEPENDENT GROUP WITHOUT HAVING EXPERIENCE, EXPERTISE, MARKET SHARE, GOODWILL, TRADE NAM E, KNOW HOW ETC. THEREFORE, AS PER PROVISIONS OF SECTION 80IA (8)&(10), 10% OF THE PROFITS EARNED BY TAHLIWAL UNIT ARE CONSIDERED TO BE AN INDIRECT BENEFITS DERIVED FROM T HE PARENT UNIT I.E. PHILLAUR. IT MAY NOT BE OUT OF PLACE TO MENTIO N THAT THE GROUP HAS STRUGGLED FOR TWELVE YEARS TO COME AT THIS LEVEL IN THE MARKET MTPUGH PHILLAUR UNIT AND HAD EARNED VERY S MALL AMOUNT OF PROFITS AS COMPARED TO TAHLIWAL AT PRESEN T. THEREFORE, 10% OF THE NET PROFITS CLAIMED TO BE EXEMP TED BY ASSESSEE FOR TAHLIWAL UNIT WILL BE DETERMINED TO BE T HE BENEFITS PERTAINING TO PHILLAUR UNIT WHO IS RUNNING TH E SIMILAR BUSINESS. AN AMOUNT OF RS. 12,16,332/- TAKEN @ 10% OF THE AMOUNT CLAIMED TO BE EXEMPTED (RS. 1,21,63,320/-) U/S 80I C AS PER AUDIT REPORT WILL BE ADDED IN THE BUSINESS INCO ME OF THE ASSESSEE FOR TAXATION PURPOSES.' IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND AS H ELD IN THE LAST ASSESSMENT YEAR IN THE CASE OF M/S. CREMICA AG RO FOODS LTD., LUDHIANA ON THIS ISSUE 10% OF THE NET PROFITS (CL AIMED TO BE EXEMPTED BY ASSESSEE) OF TAHLIWAL UNIT WILL BE DET ERMINED TO BE THE BENEFITS PERTAINING TO PHILLAUR UNIT WHICH IS RUNNING THE SIMILAR BUSINESS. AN AMOUNT OF RS.16,05,289/- TAKEN @ 10% OF THE AMOUNT CLAIMED TO BE EXEMPTED (RS.1,60,52,899/ -) U/S 80IC WILL BE ADDED IN THE BUSINESS INCOME OF THE ASSESSEE FOR TAXATION PURPOSES. 6.2 THE LD. CIT(A) HAS DELETED THE ADDITION BASED ON TH E DECISION TAKEN IN THE CASE OF THE ASSESSEE FOR THE A.Y. 2006- 07 IN THE APPEAL NO.03/ROT/IT/CIT(A)-L/LDH/2016-17 DATED 26.10.2016 BY HOLDING AS UNDER:- 'I HAVE CONSIDERED THE FACTS OF THE CASE, THE BASIS OF THE ADDITIONS MADE BY THE ASSESSING OFFICER AND THE ARGUMENT S OF THE AR. THE AO HAS REWORKED THE CLAIM UNDER SECTION80 IC BETWEEN THE TAHLIWAL UNIT AND THE PHILLAUR UNIT ON ESTIM ATED ITA NO.71/CHD/2018 A.Y.2014-15 12 BASIS WITHOUT BRINGING ANY EVIDENCE ON RECORD TO SHO W WHETHER THERE HAS BEEN ANY TRANSACTION BETWEEN THE TWO UNITS. THE APPELLANT HAS MADE THE ALLOCATION OF ALL COMMO N EXPENSES ON TURNOVER BASIS AND THE AO HAS FAILED TO MENTION ANY EXPENSE WHICH HAS NOT BEEN CONSIDERED IN THE SA ID EXERCISE. THUS, THE REDUCING OF THE ELIGIBLE PROFITS TO THE EXTENT OF 10% BY THE AO WITHOUT ANY SOUND BASIS IS UNWARRA NTED AND IS HEREBY ORDERED TO BE DELETED. FURTHER, THE BASIC PROCESS IS CARRIED OUT BY THE APPELLAN T IS THE SAME WHETHER THE PRODUCTION IS DONE FOR ITSELF OR JOB WORK. THE HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE O F CIT VS IMPEL FORGE AND ALLIED INDUSTRIES LTD 326ITR 27 HAS HELD THAT THE ASSESSEE IS AT LIBERTY TO MANUFACT URE FOR ITSELF OR OTHERS WHICH MAKES NO DIFFERENCE FOR THE P URPOSE OF DEDUCTION UNDER SECTION 80IB OF THE ACT. SIMILAR VIEW WAS TAKEN BY THE HON'BLE DELHI HIGH COURT IN THE CASE O F CIT VS NORTHERN AROMATICS LTD (2005) 196 CTR (DELHI) 47 9 . IN VIEW OF THE SAME, THE REDUCTION IN THE CLAIM MADE BY THE APPELLANT UNDER SECTION 80IC ON THIS ACCOUNT DESERVE S TO BE DELETED. THESE GROUNDS OF APPEAL ARE ALLOWED'. 6.3 THE MATTER HAS FURTHER TRAVELLED TO THE TRIBUNAL I N THE A.Y. 2006-07 WHICH STANDS ADJUDICATED IN THE FAVOUR OF THE ASSESSEE. FOR THE SAKE OF BREVITY THE RELEVANT PORTIO N OF THE ORDER OF THE ITAT IN THE CASE OF THE ASSESSEE IN IT A NO. 39 & 40/CHD/2017 DT. 08/12/2017 IN THE CASE OF M/S. CREMI CA AGRO FOODS PVT. LTD. FOR THE A.Y. 2006-07. 28. GROUND NO.4 RAISED BY THE REVENUE READS AS UNDER: '4.WHETHER UPON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE RS.12,16,332/- MADE BY THE A.O. ON DEDUCTION U/S 80IC CLAIMED BY THE ASSESSEE ON TAHLIWAL UNIT WITHOUT GIVING ANY REASONS AND BY SIMPLY STATING THAT THE A.O. IS HIGHLY UNJUSTIFIED IN DENYING DEDUCTION U/S 80IC TO THE ASS ESSEE ON THE BASIS OF SOME NOTIONAL EXPENSES SUCH AS KNOWHOW, GOODWILL, TRADE NAME ETC. WHERE THE A.O. HAS VERY CLEARLY HELD THAT THE PROVISIONS OF THE SECTION 80IA (8) AND (10) READ WITH SECTION 80IC ARE APPLICABLE TO THE ASSESSEE'S TAHLIW AL UNIT ONLY?' 29. THE ABOVE GROUND IS WITH RESPECT TO THE DEDUCT ION CLA IMED U/S 80IC AMOUNTING TO RS.1,21,63,320/- IN RESPECT OF TAHLIWAL UNIT WHICH HAS BEEN REDUCED BY THE ASSESSIN G OFFICER BY 10% OF THE AMOUNT OF NET PROFITS FOR THE REASON THAT THE ASSESSEE IS MANUFACTURING BISCUITS ON ITS OWN AC COUNT AS WELL AS DOING JOB WORK FOR ITC LIMITED AT TAHLIWAL , H.P . AND FURTHER I T IS ALSO MANUFACTURING BISCUITS AT PHILLAUR UNIT, WHICH IS NOT ELIGIBLE FOR ANY DEDUCT ION OF ITS PRO FITS. THE ASSESSING OFFICER HAS HELD THAT SINCE SAME BUSINESS IS BEING DONE AT PHILLAUR UNIT, TAHLIWAL UNIT HAS DERIVED BENEFI TS BY WAY OF KNOWHOW, GOODWILL, TRADE NAME, ETC. OF PHILLAUR UNIT AND HELD THAT 10% OF THE PROFITS EARNED BY THE TAHLI WAL UNIT ITA NO.71/CHD/2018 A.Y.2014-15 13 WERE INDIRECT BENEFITS DERIVED FROM THE PHILLAUR UNIT AS PER THE PROVISIONS OF SECT ION 80IA(8) & (10) OF THE ACT .THE ASSESSING OFFICER REDUCED THE SAME FROM THE DEDUCT ION CLAIMED U/S 80IC OF THE ACT AMOUNTING TO RS.12,16,332/- 30. BEFORE T HE LD.CIT(APPEALS) THE ASSESSEE CONTENDED THAT IT HAD SPEC IFIED ALL CONDITIONS LAID DOWN U/S 80IC(2) (A) ( I I ) OF THE ACT AND HAD RIGHTLY CLAIMED THE DEDUCT ION, WHILE THE ASSESS ING OFFICER HAD WRONGLY INTERPRETED THE PROVISIONS OF SU B-SECT ION (8) & (10) OF SECT ION 80IA OF THE ACT SINCE THESE SU B-SECT IONS REFERRED TO TRANSFER OF GOODS AND SERVICES TO ANY O THER BUSINESS OR TO ANY OTHER PERSON WHILE IN THE CASE OF THE ASSESSEE THERE WAS NO TRANSFER OF GOODS OR SERVICE TO ANY OTHER BUSINESS OR TO ANY OTHER PERSON. I T WAS POINT ED OUT THAT THE ASSESSEE HAD ALREADY AL LOCATED THE COMMON EXPENSE S INCURRED TO VARIOUS UNITS ON THE BASIS OF TURNOVER A ND, THEREFORE, THE DENIAL OF DEDUCT ION TO THE EXTENT OF 10% OF THE PROFITS ON THE BASIS OF SOME NOTIONAL EXPENSES SUCH AS KNOWHOW, GOODWILL , TRADE NAME, ETC. WAS HIGHLY UNJUSTIFIED. 31. THE LD.CIT(APPEALS) AFTER CONSIDERING ASSESSEES SUBMISSIONS HELD THE DEDUCT ION OF ELIGIBLE PROFITS B Y THE ASSESSING OFFICER AS UNWARRANTED DELETING THE SAME BY HOLDING THAT THE ENTIRE EXERCISE OF THE ASSESSING OFF ICER WAS DONE ON ESTIMATE BASIS WITHOUT BRINGING ANY EVIDENCE O N RECORD TO SHOW WHETHER THERE WAS ANY TRANSACT ION B ETWEEN THE TWO UNITS. THE LD.CIT(APPEALS) HELD THAT THE ASSESSE E HAVING AL LOCATED ALL COMMON EXPENSES ON TURNOVER BASIS AND THE ASSESSING OFFICER HAVE NOT POINTED OUT AS TO WH ICH EXPENSES HAD NOT BEEN CONSIDERED, THIS AL LOCATION OF NOTIONAL EXPENSES BY THE ASSESSING OFFICER WAS UNJUSTIFIED A ND UNWARRANTED. RELEVANT FINDINGS OF THE LD.CIT(APPEALS) AT PARA 3.2 ARE AS UNDER: 3.2 I HAVE CONSIDERED THE FACTS OF THE CASE, THE BAS IS OF THE ADDITIONS MADE BY THE ASSESSING OFFICER AND THE ARGUMENT S OF THE AR. THE AO HAS REWORKED THE CLAIM UNDER SECTION 8 0IC BETWEEN THE TAHLIWAL UNIT AND THE PHILLAUR UNIT ON ESTIM ATED BASIS WITHOUT BRINGING ANY EVIDENCE ON RECORD TO SHO W WHETHER THERE HAS BEEN ANY TRANSACTION BETWEEN THE TWO UNITS. THE APPELLANT HAS MADE THE ALLOCATION OF ALL COMMO N EXPENSES ON TURNOVER BASIS AND THE AO HAS FAILED TO MENTION ANY EXPENSE WHICH HAS NOT BEEN CONSIDERED IN THE SA ID EXERCISE. THUS, THE REDUCING OF THE ELIGIBLE PROFITS TO THE EXTENT OF 10% BY THE AO WITHOUT ANY SOUND BASIS IS UNWARRA NTED AND IS HEREBY ORDERED TO BE DELETED. 32. BEFORE US, THE LD. DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER WHILE THE LD. COUNSEL FOR ASSESSEE R EITERATED THE CONTENT ION MADE BEFORE THE LD.CIT(APPEALS) AND RE LIED UPON THE ORDER OF THE LD.CIT(APPEALS) . 33. WE FIND NO INFIRMITY IN THE ORDER OF THE LD.CIT(APP EALS) . UNDENIABLY, THE REDUCTION OF PROFITS TO THE EXTENT O F 10% HAS BEEN DONE BY THE ASSESSING OFFICER ON ESTIMATE BASIS WITHOUT DEMONSTRATING BY WAY OF EVIDENCE WHETHER ANY EXPENS ES ON ITA NO.71/CHD/2018 A.Y.2014-15 14 ACCOUNT OF KNOWHOW, GOODWILL, TRADE NAME, ETC. HAD BEEN INCURRED BY THE PHILLAUR UNIT WITH RESPECT TO TAHLIWA L UNIT. THE SAME HAS NOT BEEN DEMONSTRATED EVEN BEFORE US. F URTHER AS RIGHTLY HELD BY THE LD.CIT(A) , THE PROVISIONS OF SE CT ION 80IA (8) AND 80IA (10) CANNOT BE INVOKED IN THE PRESE NT CASE IN THE ABSENCE OF ANY TRANSACT ION BETWEEN THE TWO UNITS. THE LD. DR HAS NOT POINTED OUT ANY INFIRMITY IN THE ORDER OF THE LD.CIT(APPEALS) . WE, THEREFORE, UPHOLD THE ORDER OF THE LD.CIT(APPEALS) IN DELETING THE REDUCTION OF PROFITS OF THE TAHLIWAL UNIT BY 10% OF THE PROFITS AMOUNTING TO RS.16,16,332/-. THE GROUND OF APPEAL NO.4 RAISED BY THE REVENUE IS, THEREFORE, DISMISSED. 6.4 AS THE MATTER STANDS ADJUDICATED, FOLLOWING THE RAT IO LAID DOWN WHICH IS SQUARELY APPLICABLE TO THE APPEALS BEFORE US, THE GROUNDS RAISED BY THE REVENUE ON THIS ISSUE ARE HEREBY DISMISSED. 9. THE LD. DR FAIRLY CONCEDED THAT THE ISSUE HAD BE EN DECIDED IN FAVOUR OF THE ASSESSEE IN EARLIER YEARS, THOUGH HE RELIED UPON THE ORDER OF THE A.O. 10. IN VIEW OF THE ABOVE, SINCE ADMITTEDLY THE ISSU E STANDS DECIDED IN FAVOUR OF THE ASSESSEE IN EARLIER YEARS RIGHT FROM ASSESSMENT YEAR 2007-08 TO 2013-14 AND NO DISTINGUI SHING FACTS HAVING BEEN BROUGHT TO OUR NOTICE BY THE LD. DR, WE SEE NO REASON TO INTERFERE IN THE ORDER OF THE CIT( A) IN ALLOWING THE ASSESSEES CLAIM OF DEDUCTION U/S 80IC OF THE ACT ON INDIRECT BENEFIT RECEIVED BY THE ASSESSEE FR OM M/S CREMICA AGRO FOOD LTD. GROUND OF APPEAL NO.2 RAISE D BY THE REVENUE IS, THEREFORE, DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- # $' % & (SANJAY GARG ) (ANNAPURNA GUPTA) / JUDICIAL MEMBER '( / ACCOUNTANT MEMBER *# /DATED: 18 TH JANUARY, 2019 * ' * ITA NO.71/CHD/2018 A.Y.2014-15 15 &) *+,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. - $ / CIT 4. - $ ( )/ THE CIT(A) 5. +./ 0 , #0 , 123/4 / DR, ITAT, CHANDIGARH 6. /35' / GUARD FILE &) $ / BY ORDER, 6 ! / ASSISTANT REGISTRAR ITA NO.71/CHD/2018 A.Y.2014-15 16 DRAFT DICTATED SR.PS DRAFT PLACED BEFORE AUTHOR SR.PS APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS ORDER SIGNED AND PRONOUNCED ON FILE SENT TO THE BENCH CLERK SR.PS DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GO ES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.